The market direction outlook for Tuesday was for stocks to move above the 50 day simple moving average (SMA). It has become customary for the past several years for investors to head into stocks and push them higher in the day or two prior to the Fed meetings. We saw this just last month and again this is occurring now. Stocks are an incredibly emotional investment for most investors. When buyers step into the market and pick up stocks, other investors are watching and they become drawn in as well. As the market moves higher, it draws even more investors into stocks. The same is true for when stocks are falling. But today stocks were heading higher.
SPX Market Direction Intraday for Oct 28 2014
The one minute intraday chart below shows an incredibly stable morning and then a rally into the afternoon which lasted into the close as investors prepare for the Fed on Wednesday. In general nothing new is expected except the tapering should end for Quantitative Easing. Aside from this the Fed will probably reiterate the same language for when interest rates might be anticipated to rise. In other words, nothing new. But nothing new is all investors need to keep pushing stocks back up..
SPX intraday Oct 28 2014
Advance Declines For Oct 28 2014
While it was a reasonably quiet market day, volume was actually decent with 3.6 billion shares traded. 83% of the volume was up and 81% of all stocks were moving higher. This brought the number of new highs into high triple digits with 172 new highs versus 30 new lows. This is a big jump from Monday’s 107 new highs.
Market Direction Closings For Oct 28 2014
The S&P closed at 1985.05. up 23.42 The Dow closed at 17,005.75 up 187.81. The NASDAQ closed at 4564.29 up 78.36.
The Russell 2000 IWM ETF had its best day in months moving up $3.16 for a gain of 2.85% to close at $114.17. Finally the IWM calls I bought last week are moving higher in value. It took a long time to get the Russell 2000 to move higher.
Market Direction Technical Indicators At The Close of Oct 28 2014
Let’s review the market direction technical indicators at the close of Oct 28 2014 on the S&P 500 and view the market direction outlook for Oct 29 2014.
Market Direction Technical Analysis for Oct 28 2014
Stock Chart Comments: The SPX finally closed above the 50 day simple moving average (SMA) today and the Upper Bollinger Band turned back up moving away from a potential Bollinger Bands Squeeze. Stocks ended the day well above support levels of 1970 and 1956. The 20 day SMA is still trending sideways below the 100 day EMA but it should turn higher shortly.
Strong Support Levels are at 1870 and 1840. Both levels are strong enough to delay the market falling. 1930 was given up yesterday. 1956 is back as support for stocks and today was tested a number of times but held the market up.
The other two support levels not shown in the chart above are 1775 and 1750. I have explained that these two are critical support for the present bull market. While 1775 is important it is 1750 that is now the bottom line.
A break of 1750 would mark a severe correction of more than 13% from the most recent high. This would be the biggest correction since April 2012. A pull-back of that size would definitely stun investors at this point and it is not something I am anticipating at this time.
Momentum: For Momentum I am using the 10 period. Momentum is still positive and rising toward being overbought.
MACD Histogram: For MACD Histogram, I am using the Fast Points set at 13, Slow Points at 26 and Smoothing at 9. MACD (Moving Averages Convergence / Divergence) issued a buy signal on October 22 which was confirmed on the 23rd. MACD is continuing to gain strength.
Ultimate Oscillator: The Ultimate Oscillator settings are: Period 1 is 5, Period 2 is 10, Period 3 is 15, Factor 1 is 4, Factor 2 is 2 and Factor 3 is 1. These are not the default settings but are the settings I use with the S&P 500 chart set for 1 to 3 months. The Ultimate Oscillator is positive and overbought.
Rate of Change: Rate Of Change is set for a 21 period. Today the rate of change is back positive and confirming the trend change to up.
Slow Stochastic: For the Slow Stochastic I use the K period of 14 and D period of 3. As the Slow Stochastic tries to predict the market direction further out than just one day. The Slow Stochastic is signaling market direction is up and it is very overbought.
Fast Stochastic: For the Fast Stochastic I use the K period of 20 and D period of 5. These are not default settings but settings I set for the 1 to 3 month S&P 500 chart when it is set for daily. The Fast Stochastic is still signaling up and it too is very overbought.
Market Direction Outlook And Strategy for Oct 29 2014
Today saw a big move for stocks not just in numbers but in positions as well. The Dow is back to 17000, the IWM ETF is back at $114, the SPX is above the important 1970 support and the NASDAQ had a terrific day and up above 4500. Much of the day today and yesterday was a result of investors buying ahead of the Fed news tomorrow. While I doubt investors expect anything new, this buying ahead of the Fed comments has become a common trade.
Technically all the indicators are finally bullish and many are overbought. The move by the Russell 2000 now places it on a path to recovery as well. While nothing is ever perfect for stocks, I doubt much will be said by the Fed on Wednesday to damage the uptrend for now.
For Wednesday I am expecting stocks to show some signs of being overbought and they may even try to retest the 50 day SMA but they should be higher by the close tomorrow.
Strategy Notes and 12 Trade Ideas For Members
For FullyInformed USA Members here are the investing strategy notes before the markets open on Oct 29 2014. These are detailed strategy discussions, trade outlooks and 12 trade ideas.
Stay FullyInformed With Email Updates
Market Direction Internal Links
Profiting From Understanding Market Direction (Articles Index)
Understanding Short-Term Signals
Market Direction Portfolio Trades (Members)